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Wednesday, August 15, 2012

One thing that gets me going is comfortably-off people who feel sorry for themselves: those who complain how hard it is to get by on $150,000 a year, or retired people who profess to be "self-funded".

Someone once asked me why I was so disparaging of self-funded retirees when, from what they could see, I was going to end up as one myself. It's true. Or, rather, it's true my superannuation is too generous for me to get even a smell of the age pension.

But I'd never claim that made me "self-funded". Why not? Because I know damn well other taxpayers have contributed mightily to funding the vastly bigger private pension I'll end up on.

The other thing that annoys me about the self-proclaimed self-funded is their motive for making this false claim. They say it because they've got their hand out. I'm too well-off to get the pension, therefore you owe me.

So how about a seniors' card that entitles me to pay next-to-nothing on public transport not because I'm poor but just because I'm old? How about charging me the same nominal fee for pharmaceuticals you charge pensioners but deny to the working poor?

The so-called self-funded - the Howard government's favourite charity - enjoy all these perks. But they don't seem to realise that, the more successful they are with their begging bowl, the less true their claim becomes.

The notorious superannuation "reforms" Peter Costello announced in 2006, which centred on making super payouts tax free for people 60 and over - and which successive governments will have to laboriously unpick at great political cost in coming years - included significantly liberalising the means test on the age pension.

Suddenly, there was a sharp fall in the number of people not receiving the pension and a sharp jump in the number receiving a part-pension. But did all those with their mouths now firmly clamped on the pension teat stop referring to themselves as "self-funded"? I doubt it.

The way the numerous spruikers for the super industry tell it, governments impose iniquitous taxes on those independent, prudent, frugal, virtuous souls who struggle to save for their retirement. Rubbish.

For working people, all the additional income we earn is taxed at rates of 19?, 32.5?, 37? or 45? in the dollar depending on how much we earn. But the 9 per cent - eventually to be 12 per cent - of our salary that employers are required to pay into superannuation is taxed at a flat rate of just 15? in the dollar. Ditto for extra contributions made through "salary sacrifice".

So super contributions are, in fact, taxed concessionally. Just how concessional varies inversely with your need - the higher your income, the more you save per dollar. People like me save 30? in tax on every dollar they put into super (plus the 1.5? Medicare levy). What's more, income earned on money in super funds is also taxed at no more than 15 per cent, no matter how high your income.

Super is taxed in a way that yields little benefit to the needy, but grossly favours the better off. As someone said, for he that hath, to him shall be given.

The cost to the federal budget in revenue forgone is huge and rapidly rising. It was $30 billion last financial year and is projected to reach $45 billion by 2015-16.

But whenever this unfairness is pointed out, those who benefit (including those who benefit by managing super funds or providing advice to them) are quick to fly to the defence. It's terribly unfair to look at the gross cost of the super tax concessions without taking into account the saving to the budget from all those people who won't be getting the pension.

A study by Richard Denniss and David Richardson, of the Australia Institute, Can the Taxpayer Afford "Self-funded Retirement"?, to be released today, advises that by 2015-16, the $45 billion forgone on super concessions is expected to equal the cost of the age pension itself. (It will dwarf federal spending on education or on Medicare, and be almost double what we spend on defence.)

So just how much will the super concessions save us on pension payments? Treasury could have estimated this but, if it has, it hasn't been made public - presumably because its paucity would cause too much embarrassment to a government game only to nibble away at super's unfairness to those whose interests Labor (and Bruce Springsteen) professes to represent.

Even so, Denniss and Richardson give us a fair idea. Treasury does project that, by 2047 - 35 years' time - the proportion of people of pension age not receiving the pension will have risen by just 3 percentage points to about 20 per cent.

The main effect of all the concessions will be to increase the proportion of people receiving only a part-pension by 15 percentage points to about half of those on the pension.

From this, the authors estimate the saving on the pension bill in 2047 will be about $14 billion a year in today's dollars. That's only about half what the super concessions are costing - meaning the other half represents clear cop for the better-off superannuants (including my good self).

Treasury estimates that just the top 5 per cent of income earners collect 37 per cent of all super concessions. The authors quote a representative example of someone on the top tax rate retiring with a payout of $780,000, 60 per cent of which comes from tax concessions.

So, please, let's have a bit less hypocrisy on the great favour well-off retirees are doing the taxpayer.